What is LIBOR?
The London Interbank Offered Rate is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. LIBOR is simply an interest rate on bank-to-bank loans. That’s really all you need to know.
Like every other borrower, banks have borrowing costs based on their credit-worthiness. The less credit-worthy, the higher the interest rate they have to pay. Just like a car loan.
LIBOR is the calculated average of self-reported, unverified, estimated borrowing costs if banks were to borrow from each other at some theoretical time loosely associated with Now.
LIBOR is the sum of Lies: LIBOR is the average of all lies told by all member banks to (a) make each other think they’re in better shape than they are, and (b) to sweeten the price of deals they’re also on the other side of.
LIBOR presents a false financial picture of the state of its member banks. This means that the banks are manipulating rates affecting hundred of trillions worth of loans and contracts for the benefit of their stock price (which is where much executive compensation is parked).
The consequences for this boggle the mind. For instance, almost every city and town in America has investment holdings tied to Libor. If banks were artificially lowering the rates to beef up their trading profiles, that means communities all over the world were cheated out of ungodly amounts of money.
LIBOR is the next test of Rule of Law in the U.S.
If LIBOR manipulators aren’t hauled into a U.S. court by the U.S. government and made to pay significantly; if there are no criminal prosecutions — just patty-cake wrist-slaps; if guilty LIBOR banks are given the Jon Corzine treatment, what does that say about Rule of Law in the U.S.?
It will say it’s in shreds.
And more — it will hasten the day when the U.S. government has not just the reality of corrupt capture, but the appearance as well.
And that leads to no good place.